Tesco Enters GBP 200 Million Sale Leaseback of Two UK Stores

Yahoo Finance - April 13, 2006

The UK's largest food retailer Tesco PLC has sold a 50 pct stake in two of its stores to Morley Fund Management for 100 mln stg as part of a sale-and-leaseback deal to establish a real estate investment fund, Morley's property fund manager Andrew Appleyard said.

Both Morley and Tesco's stakes in the properties -- Tesco Extra stores in Coventry and Kent -- are included in the 200 mln stg fund, Appleyard said. The agreement allows for the inclusion of other assets in the future and the fund could go up by an extra 60 mln stg if expansion plans in Coventry receive planning permission, Appleyard said. If Tesco wants, he added, the fund could keep on growing through more property assets. Rents on the stores increase about 2.5 pct per year, Appleyard said.

Tesco has been examining a variety of options to exploit its property assets. In late March, the firm said it was in the early stages of considering whether to put all or part of its 12 bln stg freehold portfolio in a Real Estate Investment Trust (REIT). Sphere: Related Content